The slow, clumsy and chaotic elephant seems to be walking in the right direction at least. However, the huge tusker needs to maintain a steady and determined resolve-something skeptics aren't yet persuaded it can do. This is how India continues to be portrayed in contrast to the fiercely competitive Asian "tigers" or the fire-breathing dragon, which is China.

With India breaking out of the fetters of its past tightly closed economy (10.4 percent growth in the last quarter of 2003), investors are closely monitoring the progress it is making in overhauling some of its anachronistic institutions including its intellectual property rights (IPR) regime which, corporate pundits say, needs to be effectively enforced if the country is to attract critical foreign investments in pharmaceuticals and biotechnology.

Before they take the critical plunge into India's corporate waters, U.S. investors are understandably interested in knowing the financial and legal implications where transfer of technology is involved. India's IPR regime has remained an enigma for many, thanks to the Indian Government's past lackadaisical approach in a country where legislation is still a painfully slow process and courts move at what the Indian business community describes as a "bullock cart pace."

By requirement associated with its entry into the WTO, India needs to put in place an IPR regime by January 1, 2005. Officials say they're on track to do this. Skeptics, though, are dubious.

When India ratified the agreement establishing the World Trade Organization, it also endorsed a sub-agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), which came into force from January 1, 1995. The TRIPs agreement, as it is also called, laid down minimum standards for protection and enforcement of intellectual property rights-copyrights, trade marks, geographical indications, industrial designs, layout designs of integrated circuits, trade secrets, patents, and so on-with a view to reducing distortions and impediments to international trade.

As a developing country, India was given a transition period of five years, until January 1, 2000, to apply the provisions of the agreement. An additional transition period of five years-until January 1, 2005-was allowed for extending product patent protection to areas of technology not protected, mainly in the areas of pharmaceuticals and agricultural chemicals.

India has complied with some of the obligations under the TRIPs agreement by amending its Patent Act, 1970, through the Patents (Amendment) Act, 1999, effective retrospectively from January 1, 1995. This Act provides for a facility, also known as the "mail box," to receive and hold product patent applications in fields such as pharmaceuticals and agricultural chemicals, and also on fulfillment of certain conditions specified in the law, for grant of exclusive marketing rights (EMRs). Further amendments to the Act went into effect in May, 2003.

Work is now required with regard to international obligations, which will become due next January under the TRIPs agreement. These amendments are intended to institute a regime of product patent protection in addition to the existing process patent protection for food, pharmaceutical and chemical inventions.

Indian trade officials insist they are on schedule. While trying to assure foreign investors of providing them IPR protection, they emphasize that the TRIPs agreement is a "legal fact" and its obligations are "binding on all signatories, including India." If India misses the January 1, 2005 deadline, it will attract retaliatory action under the WTO disputes mechanism. Having availed of the entire transition period provided under the TRIPs agreement, India will have no basis to defend its default. Indeed, India's past record of slow implementation will further harm its standing.

Translating good intentions into action

Underscoring this matter of good faith was India's appearance this past May among 15 trading partners figuring on the U.S. Trade Representative 2004 priority watch list for inadequate protection of intellectual property rights. In making the announcement, U.S. Trade Representative Robert B. Zoellick noted that the countries on the watch list "do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection."

Although noting that many countries had sought to improve protection, Zoellick found particularly worrisome the need for significant improvement in the areas of implementation and enforcement.

Western companies jealously guard their technology. They are unwilling to transfer their technology (and, in effect, their investments) to a foreign site if they cannot protect it. "India's politicians, judging by the statements they have been making, seem to have understood the connection between giving IPR protection to foreign companies and the flow of foreign investments into the country," says Ashok Kumar Chaddha, a Mumbai-based management consultant who has been closely monitoring developments in India's IPR sector. The question in investors' mind is whether political intentions will become institutional realities.

Thanks to the efforts of the knowledge industry, Indian experts say, there is a strong protection regime in place. They reject the argument that fear of piracy precludes the flow of high technology to India by pointing to India's booming software outsourcing industry, which deals with confidential client information on a regular basis. The present concern of many foreign companies, however, is how far India's IPR regulations can be enforced.

India's police force has improved its training in cyber crimes (in some states) since the days it used to file important evidence by punching holes in incriminating floppies and destroying them. However, as some critics lament, the "why-bother-over-a-simple-case-of-copying" attitude of the authorities at the enforcement level is worrisome.

In their defense, Indian officials cite a recent landmark ruling by the Delhi High Court restricting a company in China against distributing counterfeit metering systems in India. Supporters of India's IPR regime see in this order as a strong signal to the international business community that India is serious.

The case hinged on the IPR violations of the aggrieved party, Analog Devices, which holds a patent for chips used for energy metering. In 2000, Analog introduced a chip especially developed for India, offering it as an alternative to then widely used but easy to manipulate electromechanical energy meters. Analog witnessed a sudden drop in its sales and loss of its market share from an impressive 80 percent down to 40 percent. The company deduced that it was not competition but violation of its intellectual property rights by another party, which was distributing illegally produced copies. The evidence it retrieved in the course of an intense investigation pointed to a China based company, which had faithfully copied even Analog's application form on its website!

According to official national policy as articulated by the Embassy of India in the United States, "There is a well-established statutory, administrative and judicial framework to safeguard intellectual property rights in India, whether they relate to patents, trademarks, copyright or industrial designs. Well-known international trademarks have been protected in India even when they were not registered in India. The Indian Trademarks Law has been extended through court decisions to service marks in addition to trade marks for goods. Computer software companies have successfully curtailed piracy through court orders. Computer databases have been protected. The courts, under the doctrine of breach of confidentiality, accorded an extensive protection of trade secrets. Right to privacy, which is not protected even in some developed countries, has been recognized in India."

The unique feature of the case is that Analog in the U.S. holds the patent for the product, whereas the violation took place in China. However, the case was heard at the Delhi High Court because India is the largest market for the product and happened to be the place where the loss occurred. The place of arbitration, in the event of a dispute, is a matter of debate in the legal community and is raised even before companies enter into global contracts. Both partners prefer to have it in their home countries-either because they are more familiar with the legal structure or because they do not trust the other country. Supporters of India's IPR system portray the court decision as evidence that any aggrieved party can seek remedy through Indian courts.

Justice delayed is justice denied

Still, some argue, India needs to provide special safeguards for specific industries such as the biotech and pharmaceutical industries, and also provide expeditious remedial measures for IPR violations.

Vipin K. Garg, President and CEO of Tranzyme Inc., a drug discovery and development company based in Research Triangle Park, North Carolina, stated in an interview that he is "cautiously optimistic" about India's IPR regime. Garg, who has been to India to scout for a biotech company to partner in projects for compounds, said: "The question is not whether India has an IPR regime in place. The question is whether India can enforce the IPR regulations and bring to book the violators. India's courts are painfully slow in administering justice to the violated parties, and this needs to change. It can sometimes take as long as 10 years for a court to pass judgment on a case and this is simply not acceptable to foreign investors. Courts in India can take twice or thrice as long as U.S. courts to conclude a case."

Another problem which Garg believes India should address is the question of data exclusivity. "India still does not accept data exclusivity, which is crucial for the pharmaceutical industry. When you register a patent, the data provided by the applying company should be preserved for a period of time. India's laws still do not allow data exclusivity which, in effect, means that after a company has registered its patent, another company, by making slight modifications, can create an entirely new patent of its own. This question should be addressed effectively by allowing sufficient time for the protection of the patent of the applying company," he added.

The 'justice delayed is justice denied' view is also echoed by Martin J. Adelman, a law professor who is the director of the Dean Dinwoodey Center for Intellectual Property Studies at the George Washington University Law School. Adelman feels that India has a very small number of trained patent professionals and, in addition, it has not invested sufficiently in its court system, resulting in significant enforcement delays throughout its judicial system.

Adelman, a recent visitor to the country, says that India is now fixing its "great mistake" of the 1970s when it essentially eliminated its patent law. "By 2005, it will have in place a patent system that protects all fields of technology. Industries that thrive on copying other people's work, some would say steal other people's work, are fighting for the right to continue stealing, but the pressures from India's strong high-tech industries will probably force the Indian parliament to make India's patent system a strong one. It will still be necessary to put substantial resources in the Indian patent office, and it probably will be necessary to create a specialized patent court system to make sure that patents are properly enforced."

The Washington, D.C.-based U.S.-India Business Council (USIBC) sees a growing opportunity for cross-border partnerships with India in research and development as well as testing and manufacturing across a wide range of industries from biotech to defense.

The key to developing such partnerships lies in setting up a strong IPR regime so that not one but two critical goals can be achieved, says Michael Clark, USIBC's Executive Director. "First, there needs to be a clearly defined legal regime to define basic rights or else the potential economies of cross-border collaborations will be drowned in a sea of transactions costs (i.e. legal fees). Think of this as the enabling infrastructure for collaborations in the knowledge-based industries. For example, unless basic concepts-like what is a molecule, an innovation-are defined under law, then defining who owns what and protecting the rights of parties on both sides becomes a huge hassle and the potential will go untapped.

"The second need is to have a mechanism to assure that IPR does not leak out to third parties. This is especially important where the knowledge that is shared has a potential for misuse or for application to weapons of mass destruction or terrorism," Clark argues.

While acknowledging that there has been important progress on the question of patents, Clark maintains that the pace has been quite slow and full product patent protection still does not exist in India. He also feels that the enforcement capacity is quite undeveloped and is likely to be slow to develop, "which is unfortunate, since India seems to have real competitive advantage in knowledge-based high-tech partnerships." For Clark, the main problem is not theft but the fact that product patents simply are not legally protected in India in any meaningful way. "Reverse engineering a molecule and then marketing in India and abroad is not illegal today. All you really have to prove is biological equivalence."

The main reason why one does not hear many stories about piracy or counterfeiting, however, is simply that companies tend not to take risks in India and so go to somewhat extreme lengths to protect information and technology.

"The safest way to protect IPR, of course, is not to bring it to India at all, and that is what most companies do," he says.

If India is to be integrated into the higher value-added activities in the global supply chain, an effective IPR regime is imperative. A strong IPR regime fully integrated into the international system cannot only help to assure that intellectual property is protected, but could become an asset in its own right as India becomes a global patent center.